REIT king holding fourth "liquidity event" in two years for one of his nontraded REITs, pushing his enterprise's pro-forma value up near $10 billion.
REIT maven Nicholas Schorsch continued his blistering pace of real estate mergers and acquisitions today; a publicly traded real estate investment trust he controls said it will acquire a nontraded REIT under his management.
American Realty Capital Properties Inc. (ARCP) said it will buy the outstanding shares of a related nontraded REIT, American Realty Capital Trust IV, known as ARC IV, for $3.1 billion in stock and cash. Mr. Schorsch is chief executive of both REITs. ARCP will have a pro-forma enterprise value of close to $10 billion after the deal's completion, which is expected by the end of the quarter.
It is an astonishingly quick “liquidity event” for ARC IV. The REIT registered in the spring of 2012, and independent reps began selling it to clients only in August. Nontraded REITs typically take several years to accomplish a return of capital to investors, dubbed a liquidity event, through a merger or share listing.
Unlike most nontraded REITs, which are sold at $10 per share, investors bought shares of ARC IV at $25 per share. ARC IV stockholders will receive 2.05 shares of ARCP common stock, valued at $31.02 per share, based on the traded REIT's share price for the week before July 1. Investors may also choose to receive $30 per share in cash.
Mr. Schorsch has been turning heads in the $10-billion-per-year nontraded-REIT industry by the rapid pace of creating liquidity for investors. This is the fourth nontraded REIT sponsored by American Realty Capital that has had a liquidity event in the past two years.
“We've done this four times in a row now,” Mr. Schorsch said in an interview. “When is everybody going to accept the fact we're good at making money for investors? Our investors are very pleased.”
Both ARCP and ARC IV recently said they were bulking up on net-lease real estate assets.
ARC IV in June said it would buy from GE Capital a $1.45 billion collection of retail properties with tenants including restaurant brands Burger King, KFC and Taco Bell. The portfolio is part of the formerly publicly traded Truststreet Properties Inc.
And also in June, ARCP announced that it had signed a definitive merger agreement with a traded REIT, CapLease Inc., in a deal valued at $2.2 billion.
